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13.02.2024 | European Energy Markets Monthly, February 2024

Bearish momentum persists despite cold spell

European energy markets maintained their bearish trajectory throughout January, only briefly interrupted by a cold spell. Fuel prices declined on the back of ample inventories with power prices following suit, driven primarily by a substantial reduction in carbon prices. Although power demand increased in reaction to the cold weather outlook, the lingering effects of last year’s energy crisis prevented it reaching historical cold-spell levels. On the supply side, nuclear and gas-fired power plants played a substantial role in meeting power consumption, underscoring the critical importance of dispatchable power capacity in ensuring the security of energy supply.

French nuclear production reached a three-year peak during the cold spell, mitigating risks for the remaining winter period. Nevertheless, potential challenges persist, notably concerning the possibility of strike action. EDF unions initiated a 24-hour strike recently, albeit with limited success, only impacting the availability of one nuclear reactor. Ongoing negotiations between the unions and EDF suggest the likelihood of additional strikes in the weeks ahead. Meanwhile, nuclear production in the UK averaged lower than previous decades due to numerous unplanned outages. At the same time, the UK government unveiled ambitious plans for the country’s biggest nuclear expansion in 70 years. In a move aimed at contributing to the UK’s long-term climate and energy security goals, the roadmap outlines the government goal of securing 3 to 7 GW worth of investment in new nuclear projects every five years from 2030 to 2044. This is against a background of the upcoming UK capacity market auction, targeting 7.7 GW of back-up power capacity for delivery in 2024-25 and a substantial increase to 44 GW for 2027-28, reflecting a surge in intermittent renewables. Germany’s oversubscribed tender for solar capacity last month is indicative of rapid growth in renewable capacity, although such trends are not universal across Europe. As a response to these developments Belgium, during its six-month EU presidency until the end of June, is actively addressing barriers to the deployment of more renewables and hydrogen.

On the fuels side, gas prices dropped as EU inventories ended the month at 70% and are projected to exceed the five-year average by the end of winter. Nevertheless, Europe faces gas supply challenges following the loss of Russian flows and the Dutch Groningen field, leaving the continent increasingly dependent on the spot LNG market. European coal inventories exceeded the five-year average, reflecting a global supply surplus, while carbon prices tumbled due to increased short positions in investment funds. While short-term carbon prices depend on gas market dynamics, the long-term carbon outlook remains bullish following the European Commission’s publication in early February of its 2040 ambition to achieve a 90% reduction in emissions compared to 1990 levels.


This document is for information purposes only. None of the statements and notes constitutes a solicitation, an offer or a recommendation for conducting any transactions. No warranty, either expressed or implied, is given for the information contained in this document. Actions based on this document made therein are the responsibility of those who undertake them. All liability for damages, which may result directly or indirectly from the use of this document, is disclaimed.

The accuracy, completeness or relevance of the information which has been drawn from external sources is not guaranteed although it is drawn from sources reasonably believed to be reliable. Estimates regarding future developments and other forward looking statements regarding commodities and therewith connected derivatives mentioned in this document may be based on assumptions that may not be realized. Axpo reserves the right to change the views reflected in the document without notice and to issue other reports that are inconsistent and reach different conclusions from the information presented in this document.

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